Deck 33: The Direct Method of Determining the Net Cash Provided by

Question 1

Last year Cumley Company reported a cost of goods sold of $90,000. Inventories increased by $21,000 during the year, and accounts payable decreased by $14,000. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be:

A) $55,000
B) $111,000
C) $125,000
D) $104,000

Answer 1

C

Question 2

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in account receivable would be deducted from sales revenue to convert revenue to a cash basis.

Answer 2

True

Question 3

During the year just completed, Anderson Company reported a cost of goods sold of $100,000. The company's inventory at the beginning of the year was $11,000, and its inventory at the end of the year was $19,000. The Prepaid Expense account increased by $2,000 between the beginning and end of the year, and the Accounts Payable account decreased by $4,000. Cost of goods sold adjusted to the cash basis under the direct method would be:

A) $94,000
B) $106,000
C) $112,000
D) $110,000

Answer 3

C

Question 4

During the year the balance in the accrued liabilities account increased by $12,000. In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows, it would be necessary to:

A) deduct the $12,000 from the operating expenses on the income statement.
B) add the $12,000 to the operating expenses on the income statement.
C) deduct the $12,000 from the cost of goods sold reported on the income statement.
D) add the $12,000 to the cost of goods sold reported on the income statement.

Question 5

Balance sheet accounts for Hollis, Inc. contained the following amounts at the ends of years 1 and 2: The company's income statement for year 2 follows: There were no sales or retirements of plant and equipment in Year 2. Cash dividends of $5,000 were paid during Year 2. The company pays no income taxes. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows.
The net cash provided by operating activities for Year 2 would be:

A) $14,500
B) $30,000
C) $18,500
D) $27,500

Question 6

Cridwell Company's selling and administrative expenses for last year totaled $210,000. During the year the company's prepaid expense account balance increased by $18,000 and accrued liabilities increased by $12,000. Depreciation charges for the year were $24,000. Based on this information, selling and administrative expenses adjusted to a cash basis under the direct method on the statement of cash flows would be:

A) $180,000
B) $192,000
C) $228,000
D) $240,000

Question 7

Balance sheet accounts for Hollis, Inc. contained the following amounts at the ends of years 1 and 2: The company's income statement for year 2 follows: There were no sales or retirements of plant and equipment in Year 2. Cash dividends of $5,000 were paid during Year 2. The company pays no income taxes. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows.
For Year 2, sales adjusted to a cash basis would be:

A) $111,000
B) $120,000
C) $126,000
D) $132,000

Question 8

Under the direct method of determining net cash provided by operating activities on the statement of cash flows, a gain on the sale of plant assets would be:

A) added to the amount of operating expenses reported under the accrual basis.
B) deducted from the amount of operating expenses reported under the accrual basis.
C) deducted from the amount of sales reported under the accrual basis.
D) totally ignored since the gain is not a part of sales, cost of goods sold, or operating expenses.

Question 9

Colley Corporation's balance sheet and income statement appear below:

Cash dividends were $26. The company sold equipment for $15 that was originally purchased for $6 and that had accumulated depreciation of $2. The net cash provided by (used by) operations for the year was:

A) $120
B) $124
C) $135
D) $150

Question 10

Balance sheet accounts for Hollis, Inc. contained the following amounts at the ends of years 1 and 2: The company's income statement for year 2 follows: There were no sales or retirements of plant and equipment in Year 2. Cash dividends of $5,000 were paid during Year 2. The company pays no income taxes. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows.
Net cash provided by financing activities for Year 2 would be:

A) $6,000
B) $10,000
C) $5,000
D) $11,000

Question 11

Balance sheet accounts for Hollis, Inc. contained the following amounts at the ends of years 1 and 2: The company's income statement for year 2 follows: There were no sales or retirements of plant and equipment in Year 2. Cash dividends of $5,000 were paid during Year 2. The company pays no income taxes. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows.
Net cash used for investing activities for Year 2 would be:

A) $12,000
B) $21,000
C) $17,000
D) $22,000

Question 12

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in accounts payable would be deducted from cost of goods sold to convert cost of goods sold to a cash basis.

Question 13

The ending balance of accounts receivable was $52,500. Sales, adjusted to a cash basis using the direct method on the statement of cash flows, were $425,000. Sales reported on the income statement were $444,000. Based on this information, the beginning balance in accounts receivable was:

A) $33,500
B) $66,500
C) $71,500
D) $39,500

Question 14

During the year the balance in the accounts payable account decreased by $8,000. In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows, it would be necessary to:

A) deduct the $8,000 from the sales revenue reported on the income statement.
B) add the $8,000 to the sales revenue reported on the income statement.
C) deduct the $8,000 from the cost of goods sold reported on the income statement.
D) add the $8,000 to the cost of goods sold reported on the income statement.

Question 15

The most recent balance sheet and income statement of Mackinaw Corporation appear below:

Cash dividends were $37. The net cash provided by (used by) operations for the year was:

A) $8
B) $136
C) $206
D) $152

Question 16

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in taxes payable would be added to income tax expense to convert income tax expense to a cash basis.

Question 17

Last year Madson Company reported a cost of goods sold of $800,000 on its income statement. The following additional data were taken from the company's comparative balance sheet for the year:
The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be:

A) $830,000
B) $810,000
C) $770,000
D) $790,000

Question 18

Balance sheet accounts for Hollis, Inc. contained the following amounts at the ends of years 1 and 2: The company's income statement for year 2 follows: There were no sales or retirements of plant and equipment in Year 2. Cash dividends of $5,000 were paid during Year 2. The company pays no income taxes. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows.
Cost of goods sold adjusted to a cash basis for Year 2 would be:

A) $64,000
B) $72,000
C) $82,000
D) $90,000

Question 19

Last year Lawton Company reported sales of $110,000 on its income statement. During the year, accounts receivable decreased by $10,000 and accounts payable decreased by $15,000. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows. The sales revenue adjusted to a cash basis for the year would be:

A) $125,000
B) $120,000
C) $115,000
D) $105,000

Question 20

Sitz Corporation's most recent comparative balance sheet and income statement appear below:

Cash dividends were $11. The net cash provided by (used by) operations for the year was:

A) $11
B) $93
C) $41
D) $74

Question 21

Graciana Corporation's most recent comparative balance sheet and income statement appear below: Cash dividends were $28.
The net cash provided by (used by) operations for the year was:

A) $146
B) $104
C) $179
D) $21

Question 22

Carver Company's comparative balance sheet and income statement for last year appear below:

The company declared and paid $50,000 in cash dividends during the year.
Required:
Construct in good form the operating activities section of the company's statement of cash flows for the year using the direct method.

Question 23

Van Cleef Company's comparative balance sheet and income statement for last year appear below: The company declared and paid $18,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be:

A) $429,000
B) $360,000
C) $410,000
D) $460,000

Question 24

Van Cleef Company's comparative balance sheet and income statement for last year appear below: The company declared and paid $18,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the operating expenses adjusted to a cash basis would be:

A) $200,000
B) $251,000
C) $191,000
D) $149,000

Question 25

Hardey Corporation's balance sheet and income statement appear below: Cash dividends were $8. The company sold equipment for $13 that was originally purchased for $8 and that had accumulated depreciation of $8.
The net cash provided by (used by) financing activities for the year was:

A) $16
B) $3
C) $11
D) ($8)

Question 26

Comparative financial statements for Parr Company follow:

Additional data for the year included:
* During the year, Parr Company sold equipment for $3,000 that had cost $15,000 and on which there was accumulated depreciation of $8,000.
* Equipment was purchased for $12,000 cash.
* Cash dividends totaling $8,000 were paid.
* Long-term investments that cost $18,000 when purchased were sold for $22,000.
* Common stock was issued for $10,000.
* Depreciation expense for the year was $5,000.
Required:
Prepare a statement of cash flows using the direct method.

Question 27

The changes in Tench Company's balance sheet account balances for last year appear below: The company's income statement for the year appears below: The company declared and paid $70,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be:

A) $390,000
B) $410,000
C) $430,000
D) $395,000

Question 28

The changes in Tench Company's balance sheet account balances for last year appear below: The company's income statement for the year appears below: The company declared and paid $70,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the sales revenue adjusted to a cash basis would be:

A) $990,000
B) $1,000,000
C) $970,000
D) $975,000

Question 29

Hardey Corporation's balance sheet and income statement appear below: Cash dividends were $8. The company sold equipment for $13 that was originally purchased for $8 and that had accumulated depreciation of $8.
The net cash provided by (used by) operations for the year was:

A) $50
B) $93
C) $80
D) $88

Question 30

Graciana Corporation's most recent comparative balance sheet and income statement appear below: Cash dividends were $28.
The net cash provided by (used by) investing activities for the year was:

A) $50
B) ($76)
C) ($50)
D) $76

Question 31

Detter Corporation's balance sheet and income statement appear below:

Cash dividends were $8. The company sold equipment for $20 that was originally purchased for $11 and that had accumulated depreciation of $3.
Required:
Using the direct method, determine the net cash provided by (used by) operating activities.

Question 32

The changes in Tench Company's balance sheet account balances for last year appear below: The company's income statement for the year appears below: The company declared and paid $70,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the operating expenses adjusted to a cash basis would be:

A) $440,000
B) $365,000
C) $300,000
D) $370,000

Question 33

The most recent balance sheet and income statement of Flo Corporation appear below: Cash dividends were $33.
The net cash provided by (used by) financing activities for the year was:

A) $1
B) ($33)
C) ($27)
D) $5

Question 34

Hardey Corporation's balance sheet and income statement appear below: Cash dividends were $8. The company sold equipment for $13 that was originally purchased for $8 and that had accumulated depreciation of $8.
The net cash provided by (used by) investing activities for the year was:

A) ($96)
B) ($83)
C) $83
D) $13

Question 35

The changes in Tench Company's balance sheet account balances for last year appear below: The company's income statement for the year appears below: The company declared and paid $70,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the income tax expense adjusted to a cash basis would be:

A) $73,000
B) $64,000
C) $63,000
D) $62,000

Question 36

Van Cleef Company's comparative balance sheet and income statement for last year appear below: The company declared and paid $18,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the income tax expense adjusted to a cash basis would be:

A) $10,000
B) $33,000
C) $56,000
D) $22,000

Question 37

The most recent balance sheet and income statement of Flo Corporation appear below: Cash dividends were $33.
The net cash provided by (used by) operations for the year was:

A) $169
B) ($1)
C) $119
D) $117

Question 38

Van Cleef Company's comparative balance sheet and income statement for last year appear below: The company declared and paid $18,000 in cash dividends during the year. The company uses the direct method to determine the net cash provided by operating activities.
On the statement of cash flows, the sales revenue adjusted to a cash basis would be:

A) $697,000
B) $720,000
C) $743,000
D) $774,000

Question 39

The most recent balance sheet and income statement of Flo Corporation appear below: Cash dividends were $33.
The net cash provided by (used by) investing activities for the year was:

A) ($84)
B) $84
C) ($86)
D) $86

Question 40

Graciana Corporation's most recent comparative balance sheet and income statement appear below: Cash dividends were $28.
The net cash provided by (used by) financing activities for the year was:

A) ($28)
B) $2
C) ($67)
D) ($41)

Question 41

Laperriere Corporation's balance sheet and income statement appear below:

Cash dividends were $30.
Required:
Prepare the operating activities section of the statement of cash flows using the direct method. In other words, determine the net cash provided by or used by operating activities using the direct method.

Question 42

Menz Corporation's balance sheet and income statement appear below:

Cash dividends were $5.
Required:
Prepare the operating activities section of the statement of cash flows in good form using the direct method.